Areas around Baltimore

20 Replies

I am looking to invest in the greater Baltimore area - probably two houses in the $200k - $300k range. I'm not looking to renovate or buy wholesale/foreclosure or any other discount option. I'm looking for a good deal on a turnkey property that i can immediately rent out. Hoping for some cash flow, but more importantly appreciation greater than inflation - ideally 3%-4%. Does anyone have any thoughts on areas? Owings Mills looks like it has had a lot of development - is this area getting overdeveloped or is there a lot of demand out that way? And Baltimore city east? I've seen posts that people don't believe there is any appreciation there. I own a house on N. Montford and it's seen a lot of ups and downs in value. I'd love to hear any thoughts on this. (Ned?) Thank you anyone for your opinions!

I am not sure if there is anyone who is selling turnkey rentals on a large scale in the Baltimore area.

I can see your reluctance to buy a project given your distance, however I wouldn't completely write off other avenues of acquiring properties.  A good wholesaler could provide you a good lead.  This is because they probably are dealing with 2 or 3 potential sellers who aren't willing to discount enough to make a flip-fix deal.  If you look at the most desirable properties in this category you should be able to get a significant discount from retail - I doubt it would be 30%+, but 10-15% should be achievable, especially closing with cash.

Thank you Jesse. Yes, I should clarify - I am totally open to any avenue that gets me a turnkey property. My assumption is that its harder with wholesale because the houses are more likely to need some work - I could be off the mark on that, I've never explored buying wholesale properties. If I can get a turnkey rentable property from a wholesaler, and I can get it even at a 10%-15% discount, that's great! My real challenge is researching areas from afar - I lived in Baltimore city and Annapolis 2001 - 2011 so I know the basics. But, it's the fine-tuning, drive-through-the-neighborhood information that I don't have access to. I'll be coming down for a research trip in the near term, but won't have too much time so I want to plan my trip carefully and be sure to look at properties in the right areas. So far, I'm thinking Owings Mills and the popular city neighborhoods (fells, canton, ppark, locust). I also don't have a huge tolerance for difficult renters, mainly because of the distance, so I need to stay in decent neighborhoods.  

@Elke Cardella When you are that far away, you need to keep in mind a few thing: 

    Out of state people might try to sell you properties that are not in nervelessly good investments for you but it helps them to achieve their goals by unloading it to you, and others.

    Also appreciation can be speculative as there are no grantees that you will get them in the future. 

That being said what you probably would want is to do your own homework, by look up US Census sites for various counties around here, and look for areas that had continuous population growth in say the past 10 years, and with a forecast for additional growth as well. I generally like to see at least a 1.5% growth. Then verify your target area by check the crime reports websites such as www.crimereports.com

       With out some some basic research, some one could sell you properties at highly inflated properties.  

        Before singing anything I would highly recommend to visit down here and see it for your self what you are getting into.The Southwest Airline Hub is located right here, at BWI (Baltimore Airport) if you catch them on a good day you can fly here probably for about $200 round trip.

     One more thing: 

"Caveat Emptor"

Years ago in the 90s my mentor used to warned me about "turn key" properties, he  said that experienced investors will always keep the "good" investments and only pass the so so ones to someone else, and they market those as "turn key" properties.

        If you are in the area and would like to learn more about our area, i will be happy to grub a cup of coffee with you.

Good Luck to you!

Greetings Elke:

Welcome to investing in Maryland.  Our state slogan: "If you can dream it, we can tax it."  You will have a business entity tax of $300/year, and a tax for the rain on your property.  Make sure you understand the lead paint law in MD.  Properties built prior to 1978 must register with MDE ($30 reg, ~$300 to inspect,).  If not lead free you can be sued 20 years later for an exposure.  I know people that owned a property for as long as it takes to sign the deed at a double close that were sued for lead paint exposure.

Many of our smarter investors invest outside Maryland, for rentals anyway. If you still want to look for property here, franklymls.com is a great website to search properties on the MLS. (Read the info on advanced searching.) Check the Baltimore REIA website for general information. We have lots of wholesalers, just know what you are buying. This meetup group http://www.meetup.com/BwiMeetup/ puts out a daily email from members with various requests/deals. (change settings to get daily instead of individual emails.)

Finding the next Federal Hill or Canton area is not easy.  I don't see Owings Mills as an area for rapid appreciation.  (There were a lot of foreclosures there so there may be deals to be made.)  I think the tenant pool for $250k rental property is small. (Rodgers Forge?, near Towson which has some major growth plans.)

Best of luck.  Let us know why Maryland appeals to you.

Wayne G.

@Elke Cardella   I do inside the city not surrounding areas but I have heard many of the lower social economic class are moving out of the city to Owings Mills. These may be the tenants you wind up with. I would look into this further. 

$200-300K properties probably won't cash flow well. They may even have negative cash flow.  Even if acquisition price was not an object I doubt I would invest in areas that expensive. I would be in areas 1/2 that much inside the city and 2/3 that much outside the city.   If you are used to Wellesley prices you need to adjust dramatically for Baltimore. The median family income in Wellesley is $155K in baltimore city it is $48K

Inside the city I would love to be buying in stable modest priced areas like 21212, 21234, 21214. I would avoid the area N of Patterson Park for an out of state investor that wants no hassle. Opportunity here but more risk than I think you want.  For a little nicer area that is too pricey for me but may be want you want, I would look at Mount Vernon, Bolton hill, Charles Village

Some of the areas you mentioned like Fells point or locust point are trendy and affluent homeowners are buying there. That does not mean that the tenant base there is likely to be as affluent.

Originally posted by @WAYNE G. :

Greetings Elke:

Welcome to investing in Maryland.  Our state slogan: "If you can dream it, we can tax it."  You will have a business entity tax of $300/year, and a tax for the rain on your property.  Make sure you understand the lead paint law in MD.  Properties built prior to 1978 must register with MDE ($30 reg, ~$300 to inspect,).  If not lead free you can be sued 20 years later for an exposure.  I know people that owned a property for as long as it takes to sign the deed at a double close that were sued for lead paint exposure.

Many of our smarter investors invest outside Maryland, for rentals anyway. If you still want to look for property here, franklymls.com is a great website to search properties on the MLS. (Read the info on advanced searching.) Check the Baltimore REIA website for general information. We have lots of wholesalers, just know what you are buying. This meetup group http://www.meetup.com/BwiMeetup/ puts out a daily email from members with various requests/deals. (change settings to get daily instead of individual emails.)

Gonna have to respectfully "clarify" what Wayne said. First, Maryland is really no different than most states trying to balance their budgets. As a guy from MA, you probably know what this is like. Taxes and fees are part of the business equation, and if your business fails "because of the taxes," you are kidding yourself. It failed because you failed to plan for the taxes. It's like saying "maintenance costs put me out of business." That should only happen if something entirely unpredictable happens. Research and budget for taxes. If you can't budget for the taxes, then find another business. The "rain tax" as described here is a relatively small (couple of $ a year) stormwater remediation fee that other jurisdictions charge as well. Honestly, it's going to be one of the least expensive things you deal with.

Next, is lead paint, which is serious. There are plenty of ways to mitigate risk. You can never eliminate the possibility of getting sued. As a recent podcast episode pointed out, the guest stayed in her place one night before she got sued for $10k. You can sue anyone for anything. The question is whether or not you can be successful in either a) getting out of the suit once its filed, b) reducing your risk of lawsuit, or c) ensuring that you will prevail should it come right down to it. Also, the statute of limitations runs three years after the exposed kid turns 18, so, up to 21 years and nine months (including gestational exposure). Going to the meetups, talking to guys like @Ned Carey  or @Tyrus Shivers  will give you a good idea on how to protect yourself. Ned has already pointed out some issues with the market you are looking at. From what I've seen (this is anecdotal, based on limited evidence), Baltimore County courts are going to be a bit more landlord friendly than City courts. First time you get sued, find a good lawyer and bring your paperwork. If you did the right thing, it's still going to cost you a bit of money, but you shouldn't get taken to the cleaners.

Because of the demographics in Baltimore, managing your own properties might be too time-consuming if you have a full-time job or live out of state. Ironically, lower priced properties tend to have more management headaches, but this is why you hire a manager. Several BP members have management companies, and seem to care enough about the business to make a good effort.

My larger points is that lawsuits happen. My uncle, who is probably one of the best businessmen I know, got sued for $12million the day after one of his tenants discovered mold in the house college. Not even kidding. His places are 100% renovated when he moves people in, and his firm does great work. When he got the call from the tenant, he had a team of certified mold cleaners working on the house to remediate the problem within hours, along with plumbers, roofers, etc to figure out why mold grew in the first place. He was incredibly accomodating to the tenants, and I'm sure it cost him a bunch of money, but he knows that doing the right thing will eat into your bottom line sometimes. Got sued anyway. It happens.

Finally, don't bank on appreciation, because you never know if an area is going to pan out, and changes are, the odds of appreciation are probably factored into the price. Instead of focusing on growth, I would personally focus on value. If a lot of people are excited about a particular area appreciating, realtors/sellers are going to price that into the equation. Appreciation is a mental thing.

Thanks everyone for your responses. Taxes are a cost and I agree they need to go into the model. I currently live in Massachussetts so even the Baltimore city taxes seem somewhat reasonable compared to what we pay up here. Thank you also about the importance of protecting yourself against lawsuits, I'm sorry to hear about your uncle @Andy Gross . And also, I know "don't bank on appreciation" is a motto here on BP, and I agree with it. Having said that, I'd still like to steer my investments to properties that have a good chance of appreciating. I own two rentals in MD, one in Baltimore City on the unit block on N. Montford, just north of Patterson Park and another down in Eastport in Annapolis. They both have been good! They don't cash flow too much, together around $250/month but I think they are good long term holds and by my calculations (that do assume some appreciation, 3% annually) the properties increase my "net wealth" by $35k+ year. So, the reason why I'm interested in Maryland is because I know the investment can work there AND yes, compared to Massachusetts, everything is quite a bit cheaper there. Cap rates in my neighborhood are probably around 3%! Also, the inventory here is very old. I just need to hone in on a neighborhood. Thanks Ned for the neighborhood ideas as well as the thoughts on Owings Mills, and the tenant profile, doesn't sound ideal.

@Andy Gross @WAYNE G.   @Ned Carey  

If you're happy with 3-4% CoC on a full cash purchase, you can probably find move-in-ready houses in Baltimore County that qualify right off the MLS...

Shoot me a PM if you'd like me to run an MLS search for you...

@Elke Cardella  

The lawsuit got sorted out in time. I don't know the final resolution, but nobody was unjustly enriched. Lawsuits happen. I know, because I'm a lawyer. Rarely is it personal. It's part of the business and part of the agreement landlords make to tenants to provide a safe product. When landlords fail, lawsuits happen, but, some are going to abuse the system. The best you can do is screen tenants well and make sure you have a good, up to code, lead-free product. Also, lots of certain entities get sued time and time again. I would avoid buying properties owned or managed by these entities. But also, running background checks on tenants can weed out serial-plaintiffs.
I think appreciation can happen, especially in the right areas. Unit block of North Montford is nice because of its proximity to the park, and there aren't a lot of shells left in the unit blocks.

Thanks again. I would be fine with a 5% CoC assuming full cash (but would probably leverage). I'm still about 6-8 weeks away from looking at properties and might take you up on your offer at that point J. Scott. Yes, Andy, when I bought the montford house in 2004, it was about 40% (I'd guess) shells. I used to joke with my friends that I'd bought a house that was featured on "the wire", which it was. Now, it's probably 10% or less. Lots of improvement.

I own two in the Eastwood neighborhood (21224) that I purchased about 3 years ago, one a foreclosure and one a short sale.  They both cash flow well, and a reasonably stable neighborhood, convenient to I-95 and Bayview Hospital.  You may be able to find something in that area that will cash flow. Owings Mills, I don't see much promise for cash flow there.  There are a lot of foreclosures in Parkville (21234) that will cash flow, the only problem is trying to find something that isn't in bad shape.  Personally, I'm looking out of state now, Indiannapolis and Kansas City.  The ratios (price to rent), not to mention taxes, are so much better. 

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Elke - your OP says you own a home in Baltimore - when did you acquire it (recently or a long time ago?) - a weekend trip down to Charm City where you can buzz around in a car  - using all the helpful information above - will help you.   There is a turnkey provider that I've heard of but have never used. They pop in and out of the Meetups and REIAs here.    There are people here on BP that can vet a lot of this stuff for you so if you come across some groups, don't hesitate to ask. 

@Elke Cardella   One of our members put it this way at our last meeting: Appreciation might be in Wellesly, Cashflow in Brockton. Depends on your taste for risk/management.

@Mike Hurney  

Yes, appreciation in Wellesley with lots of negative cashflow because the entry price is $800k for a house that would sell in other towns for $150k :) Thanks for the tip on Brockton. I'll look into that.

@Christina R.

Thanks a lot for the advice - bought the house on the unit block of N. Montford in 2004 :) Probably overpaid at the time, but enough time has passed that there's good equity and cashflow now. If I remember correctly, you didn't believe in appreciation in Baltimore city - do you still think that is the case? Or are you referring to a particular neighborhood? I must say that it's taken over 10 years to get a bit of appreciation on the Montford house, but my timing was just off. Baltimore city is a tough call.

@Elke Cardella  Some additional thoughts. You may want to look at the areas between Penn Station and Charles Village into the Barclay neighborhood. The area between North Ave and abut 27th street has lagged in development, but you may be able to get on a rising tide in that neighborhood. Lots of development in Station North, which had previously stalled out during the recession. I couldn't tell you numbers, honestly, but there are some small multi-family buildings and mixed use buildings, that with a little love and stabilization, could see some appreciation as the rest of the neighborhood comes online.

@Elke Cardella  

 The areas right now where I'm looking for rentals are really cashflow areas, I would never assume the properties will appreciate, ever.  I could get really lucky but that would be it - pure luck.   I know there are areas in Baltimore where property values are stable and will most likely grow over time.  I don't know the city well enough to know exactly where those areas are.

Cape St Clair  at the end of College Pkwy in AA county .  Good schools , stable neighborhood , water priviliges . 

Hi @Elke Cardella

I am looking at houses in Baltimore county zips 21234 / 21236 /21228

I have 2 at this moment that im working on that are possible buy / holds.PM me and i'll give you the details

if you're looking for appreciation, and are trying to spend that kind of money (independent of cash flow)....go where people wants to be....aka Federal hill, Canton, Locust point, Hamden, maybe Roland park (expensive), maybe Remington (careful where you are in Remington),...outside of the city, Towson (Towson u area), hunt valley, some others......with 2-300k x 2, many options are available to you. Owings Mills isn't horrible from a rental perspective. though spending that much money will afford you many options. Get a good realtor.

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